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Why Amazon Has No Profits and Why It Works

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Re: Why Amazon Has No Profits and Why It Works

#111

Post by marincounty »

aeturnum wrote: post #98

Am I the only one shocked that online sales make up only ~8% of US retail activity? I buy everything I can online, and expect to maintain that trend as much as possible. Is this just a case of me being relatively young and affluent, or are there sectors of the economy that will never go online?

I think affluent is a factor? When I go to other areas of the country I'm surprised to see the the huge amount of entrenched poverty. Many of these people don't have access to debit cards, and any ruined their chances of getting a checking account through a bank(banks have there own credit checking system). I see too many check cashing places, a pawn shop on too many corners, billboards targeting the poor, and naive. Yes--people buy, but it's food at Safeway, or the Dollar store, or Goodwill?

The America that is rich and poor is here. I hope the U.S. dosen't turn into Mexico; where the wealthy can't leave their house for fear of kidnapping, or worse. I know I casually slip off my watch when traveling to certain areas, and wouldn't think about buying an expensive road bike again.

Re: Why Amazon Has No Profits and Why It Works

#112

Post by ctdonath »

bowlofpetunias wrote: post #31
ctdonath wrote: post #14

TL;DR - No matter how you squint at it, Amazon drives all profits back into growing capacity and market coverage. Amazon alone accounts for around 1% of US retail revenue.

That 1% means nothing without knowing how much of that retail revenue currently goes through e-commerce. But I have sneaking suspicion that there's still a lot of room for growth. Also, outside of the US Amazon has just barely started to expand beyond books. In most countries online retailers are bracing themselves for the moment Amazon starts eating their lunch. Unless Bezos suddenly has a change of heart, this grow…

this growth strategy could go on for many, many years

This growth strategy HAS gone on for many, many years.

And it's serving Bezos et al very well.

Re: Why Amazon Has No Profits and Why It Works

#113

Post by jfoutz »

swalsh wrote: post #95
ChuckMcM wrote: post #46

Earlier quoted context omitted.

As the article points out, they don't. By running the business this way they are constantly building / growing new businesses but during a downturn they just build more slowly (rather than lose money). It is a very different way of operating but one which has provided some interesting benefits for them. Nominally a business uses profits to either pay dividends or fund unexpected opportunities (like buying some small…

"Interestingly enough, after reading that, I realized that Google doesn't stand a chance in hell of beating them at commerce." I used to work for a strapping start-up. Our competition had a lot more money, and people than us... but it didn't really matter because we were smarter in how we approached building the product. The future of eCommerce is going to be very heavily dependent on AI & robots. Product Suggestions…

Both Amazon and Google are very smart. Amazon seems to have a greedy algorithm with regard to new tech. I mean, Amazon seems to keep automating the least efficient thing - http://www.kivasystems.com/ for example.

Google is much more forward looking, looking for big changes, like self driving cars. I can see google taking over more markets like they did with search. "more wood behind fewer arrows" was the saying.

Amazon is much more broad, if Amazon has something, they'll rent it to you.

Re: Why Amazon Has No Profits and Why It Works

#114

Post by exelius »

pdpi wrote: post #35
exelius wrote: post #24

I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. That way, increased competition can actually fuel your growth. The talk was about APIs, but Amazon views APIs as a general term: "Fulfilled by Amazon" is an example of a non-technical API. Likewise, I think Amazon's s…

> The talk was about APIs, but Amazon views APIs as a general term: "Fulfilled by Amazon" is an example of a non-technical API. It's not a "non-technical API". We have name for those things: they're services. Amazon provides services, and that extends to both digital services (with which you interact via APIs — that P stands for Programming, damn it!), and meatspace services.

Yeah; the talk was to a technical crowd, so I think he was trying to make an analogy as to how a developer should think about them. But Amazon's culture very technical, so it wouldn't surprise me if this actually was the way they think about them.

Re: Why Amazon Has No Profits and Why It Works

#115

Post by MaysonL »

exelius wrote: post #24

I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. That way, increased competition can actually fuel your growth. The talk was about APIs, but Amazon views APIs as a general term: "Fulfilled by Amazon" is an example of a non-technical API. Likewise, I think Amazon's s…

In rergard to inventory risk: note that their accounts payable are several times their inventory — their suppliers are financing their inventory (and then some).

Re: Why Amazon Has No Profits and Why It Works

#116

Post by exelius »

andrewtbham wrote: post #38
exelius wrote: post #18

Earlier quoted context omitted.

In retail, yes. Retail margins are usually less than 3%; so $20m/yr in revenue would give you less than $600k/yr in profit. Not bad money by any means; but certainly not enough to need a bunch of shareholders. Contrast this with the fact that an average Walmart does over $100 million a year in revenue (though Walmart's margins are closer to 1%), and it's actually not that huge.

Wal-Mart's margins are 3.3% (Trailing 12 months) http://finance.yahoo.com/q/ks?s=WMT+Key+Statistics

Ah; you're right. I was recalling a statistic that Walmart's margin on specific items can be as low as 1% and must have gotten them confused. :)

Re: Why Amazon Has No Profits and Why It Works

#117

Post by valarauca1 »

WalterBright wrote: post #100
vinceguidry wrote: post #96

Earlier quoted context omitted.

Well, at the time, the kerosene market was declining and there was nothing bringing it back. Right after the breakup, Henry Ford finally perfected the automobile, and Standard Oil came right back.

Market share isn't the same thing as market size. The point being, SO was losing to competitors.

Very true. From 1870 to 1890 SO was 90% of the oil market. By 1907 they were 68%.

Their main competition was from Russia oddly enough.

Re: Why Amazon Has No Profits and Why It Works

#118

Post by MaysonL »

twistedpair wrote: post #44
exelius wrote: post #24

I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. That way, increased competition can actually fuel your growth. The talk was about APIs, but Amazon views APIs as a general term: "Fulfilled by Amazon" is an example of a non-technical API. Likewise, I think Amazon's s…

At some point, when you're handling all the customer money, and the merchant money, and the supplier money, you become the ultimate middle man as everyone owes you money and the actual amount of money you need to move gets small and smaller because you're just netting internal accounts. There must be some massive savings (read profit) to be made there, when the entire economy is really just Amazon.

Good point: note that they get the customer's money before they pay the supplier (their accounts payable are a multiple of receivables), and they sell the merchandise before they pay for it (their payables are a multiple of their inventory).

Re: Why Amazon Has No Profits and Why It Works

#119

Post by MaysonL »

macspoofing wrote: post #34
exelius wrote: post #24

I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. That way, increased competition can actually fuel your growth. The talk was about APIs, but Amazon views APIs as a general term: "Fulfilled by Amazon" is an example of a non-technical API. Likewise, I think Amazon's s…

That's all great but at some point they still need to turn a profit.

They're turning a profit continuously: it's just that they're turning that profit into warehouses rather than into cash.

Re: Why Amazon Has No Profits and Why It Works

#120

Post by theodoree »

igravious wrote: post #77
vinceguidry wrote: post #66

Earlier quoted context omitted.

> I listened to a talk by Amazon's CTO, Werner Vogels, where he was explaining that Amazon's entire strategy is to build an infrastructure for itself, then rent that infrastructure out to its competitors. This was the game played by John D. Rockefeller. He had so much infrastructure built up by the time they split up Standard Oil, that each new state Standard Oil immediately had everything it needed to keep operation…

Blimey. Fascinating. Sounds like a rather frightening and ruthless individual. Am curious. What would your nominations be for the Rockefeller of the tech (software/hardware) world? Ever thought about that?

>Fascinating.

If you have low self-esteem maybe. Rockefeller was a piece of shit.

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